Superannuation funds not yours until you retire

Tania Waterhouse | 13 November 2017

One of the biggest mistakes you can make as a trustee/member of a Self-Managed Superannuation Fund (“SMSF”) is to treat the fund’s money like your own and withdraw the monies before you have reached retirement age. This is known as early release. And if you do not meet one of the exceptions, it is known as illegal early release of superannuation funds.

The sole purpose of a superannuation fund is to ensure individuals have monies for their retirement. So, a member of a superannuation fund generally cannot access their superannuation funds until they reach retirement age. In rare instances, such as terminal illness or long-term unemployment, your superannuation fund may let you access some of the money early.

Superannuation rules provide for strictly limited exceptions to allow you to withdraw your funds before your retirement age. The purpose of the early access scheme is to assist you with your immediate and reasonable unpaid expenses. You can apply for the early release of super to help your partner, child or other dependant. The ATO will consider a non-exhaustive list of compassionate grounds for the early release of some SMSF monies; these may include severe financial hardship or terminal illness.

In addition, a Court may order that the person pay to the Commonwealth a monetary penalty for a breach. The maximum penalty for a civil penalty order is 2,000 penalty units. From 1 July 2017, the amount of the Commonwealth penalty unit is $210; therefore, the maximum civil penalty is equal to $420,000 per contravention.

So it is essential to be aware of the laws governing the management of your SMSF, particularly early release of superannuation funds that you do not breach them.

What you should do

If you have breached superannuation law in regard to your SMSF, or you would like to know more about your rights and responsibilities, contact us now.

Comment: The earlier you act to rectify a breach the better, so contact us now if you have breached the illegal early access rules now so that we can help minimise damage to you and your SMSF and avoid the ATO taking punitive action

Chapeau! as they say in French thank you

Dear Tania,

From my first contact with yourself and your firm, I knew I had contacted the right people to assist me in reviewing an ATO audit decision. How did I know that? I strongly felt that I would comfortably accept whatever outcome it may be, even if it was not the best, feeling confident that you and your team of experts would provide the best possible advice and chance to resolve the matter. Furthermore I also felt that you and your team do care about their clients and was impressed by your commitment. Was I right? Yes I was, your team achieved the best outcome that could have been expected: a win!

Dear Keerti, Your dedication to resolving my taxation matter in the best possible way (“fighting tooth and nail” as you said) was remarkable and to say the least very much appreciated. You were approachable and always available for comments or explanations. Although it can be challenging, you were soon familiar with all the details of the evidence. Above all you were able to secure a win. I would have no hesitation whatsoever to recommend you.

Chapeau! as we say in my native French as a mark of gratitude and respect.